The U.S. Treasury Thursday said the federal government should draw up a plan to start recapitalizing mortgage titans Fannie Mae and Freddie Mac while calling on Congress to draft a comprehensive housing reform that would permit them to be safely freed from authorities control.
The Treasury’s plan, released in a 53-page report, indicates the first main effort to jump-start housing finance reform in Washington after a suspended 2012 attempt by the Obama management.
The report requires recuperating Fannie and Freddie and eradicating them from their government lifeline, but it inevitably strikes a wary tone by failing to commit to reliable timelines or a specific recapitalization program.
It commits to preserving the 30-year fixed-rate mortgage, a foundation of the U.S. mortgage sector, and leans heavily on Congress to implement several essential measures, including the production of an explicit guarantee for Fannie and Freddie’s mortgage-supported securities.
As such, it might disappoint some traders who had been expecting a speedy overhaul of the mortgage behemoths and conservative Republicans who had assumed the management would take bold measures to sever all government links with the companies.
Instead, the Treasury plans a series of incremental administrative measures it can take to support Fannie and Freddie’s funds, decrease their risk to the taxpayer, and contract their footprint in the secondary mortgage business.
Democrats were fast to criticize the program, warning it might raise housing costs by limiting access to mortgages to lower-earnings Americans.
Fannie and Freddie, which assure more than half the country’s mortgages, have been in conservatorship since they were bailed out through the 2008 economic crisis and Washington has since strived to agree on a program to get them back on their feet.